Abhirup Bhunia
30 December 2013
Even as a diplomatic spat between the United States and India rages, the US is quietly leading discussions over two trading blocs that could alter the dynamics of international trade and the stakes are high for India. For all its importance, the absence of a debate in the public sphere in India surrounding these trade blocs -- the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) -- is conspicuous, if damaging.
The TPP is a proposed regional free trade agreement (FTA) geared to tackle '21st century' trade issues, involving the United States and major Asia Pacific powers like Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The TTIP is quite simply a FTA between the European Union and the US, two major Western powers.
These mega-FTAs command massive numbers. The TPP itself covers about 40% of global GDP and nearly a third of world trade. The TTIP on the other hand is the biggest FTA ever covering as much as 30% of world trade. While India has officially joined the Regional Comprehensive Economic Partnership (RCEP ), another free trade agreement led by China, it is yet to join the TPP.
India's BRICS partner and a major world power, China is completely missing from TPP discussions, obviously bearing out the geopolitical exclusionary tactic adopted by the US. By hoping to shut out China from a trade deal of such mammoth proportions, the US hopes to gain a geopolitical brownie point. Interestingly the RCEP, which involves the ASEAN+6 countries and of which India is a part, hopes to negate the TPP. With China in it, RCEP covers more than half of the world's population. India finds itself in a tricky situation having to choose between China led RCEP and US led TPP. But while RCEP is a trade bloc subscription to which doesn't preclude India's commitments elsewhere, the implications of TPP are wide-ranging.
The fine-points of the TPP are going to be revised as talks move ahead in the coming days, since multilateral talks are never without compromises during the journey towards consensus. But broadly speaking, the TPP is more than just a FTA involving free movement of goods and services. It involves sophisticated elements of modern-day trade, including things like an agreement on labour standards (which is back in focus post the fire in Rana Plaza garment factory in Bangladesh), on environmental standards, and Intellectual Property Rights (IPR) - broadly Western-styled arguments on things that are often actually unacceptable to developing countries. For instance, it would be hard for developing countries including India to concede to strict environmental standards for production of goods that will be traded because of the stage of economic development that they are in.
However, India's views on some aspects of modern-day trade are aligned with the TPP world view. For instance, India's stance on IPR. It is in India's own interests to protect IPR to prevent not just piracy in the entertainment industry, but also misuse of software. However, it is likely that the domestic pharmaceutical lobby might be up in arms since India is one of the world's largest generic medicine manufacturer (and a supplier to poorer countries in Africa). It is worthwhile to recall that one of the sticking points in the India-EU FTA was drug patents. So, India has a few issues to resolve, but staying away from TPP would not be a wise thing to do - geopolitically speaking. Also, India by virtue of it being the only BRICS country in the TPP might as well be some sort of a BRICS representative in the TPP. Of course, India's joining the TPP could in a way signal siding with the US in this US-led TPP v/s China-led RCEP fight and might have China worried.
The TTIP on the other hand, although not unrelated, has its own geo-economic implications. While the TTIP is an EU-US deal the stakes are high for developing countries, not least because TTIP could potentially become the reference point for future multilateral deals, as this is the first trade deal which apparently deals with modern-day complications of global commerce. For instance, the TTIP envisages harmonising regulations of states entering into the agreement, meaning that MNCs would no longer operate under divergent set of laws across borders. This will likely have a positive bearing on trade volumes. Also, in view of the diminishing leverage of the WTO given years of unsuccessful trade talks until Bali where only a temporary arrangement (the 'peace clause') has been made, the TPP and TIPP together could signal a move towards eventually becoming more relevant than the WTO.
There is a broader geopolitical angle to the game too - involving the BRICS. The grouping, now a growing force to reckon with, would surely be tracking developments keenly on the TTIP front and might actually be spurred into action, including perhaps moving ahead with the establishment of a BRICS FTA meant to act as a counterweight to the TTIP. Therefore while the TPP is there for India to join, the potential geopolitical gains from TTIP can be hoped to be negated by a BRICS FTA. While still far-fetched, experts have long called for the same.
Research indicates that when states enter into a FTA, trade zooms and the spill-over effects on domestic economies include rising growth and employment gains. Independent research shows that the TTIP could boost the EU economy by $165 billion and the US's by $125 billion. Apart from acting as counterweight to the TTIP, a BRICS FTA would boost these economies including India's.
What India, as an aspiring global power, should take note of is that the TTIP will potentially contribute greatly to the evolution of rules of global trade particularly in areas where multilateral-level consensus is still elusive. Thus, it might end up being the beginning of yet another round of Western-dictated rules of global trade and commerce. It is in India's interests to keep a close watch of the situation and make necessary interventions.
(Abhirup Bhunia is a Research Intern at Observer Research Foundation, Delhi)
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